- Loonie gets minimal support from higher oil prices.
- Canadian inflation data released on Tuesday.
- US dollar opens with a mixed tone-JPY outperforms.
USDCAD: open 1.3533-1.3537, overnight range 1.3520-1.3551, close 1.3545, WTI $84.48, Gold, $2155.02
The Canadian dollar consolidated Friday’s losses overnight and is trading with a negative bias in NY. The Canadian dollar weakness is a direct result of the surge in the US 10-year Treasury yield to 4.30% on Friday and where it opened today.
The surge in US Treasury yields widened the CAD/US interest rate differential, which also weighed on the Loonie.
Traders are quickly revising their outlook for US rates, and most are in sync with the December Fed dot-plot projections for three rate cuts in 2024. The Federal Open Market Committee (FOMC) meets Wednesday, and those projections will get revised.
The Bank of Japan monetary policy meeting is tomorrow. A report in the Nikkei newspaper suggested that the BoJ would end its negative interest rate policy at that time. If so, messy USD/JPY trading will spill over into the other G-10 currencies.
West Texas Intermediate (WTI) oil prices got a lift after China reported that Industrial Production rose 7.0% y/y in February (forecast 5.8%), which raised hopes that Chinese oil demand would rise. However, the enthusiasm was muted due to the National Bureau of Statistics reporting a 9.0% drop in property investment. EUR/USD traded quietly in a 1.0880-1.0901 range, with traders ignoring HICP data (actual 0.7% m/m), which was as expected, and content to await the FOMC decision.
GBP/USD chopped about in a 1.2727-1.2747 range ahead of key inflation data on Wednesday that will set the tone for the Bank of England's monetary policy decision on Thursday. The BoE is expected to reiterate that inflation is too high and that rates need to remain in restrictive territory.
USD/JPY is in the middle of its overnight 148.90-149.33 range, underpinned by the rise in the US 10-year Treasury yield to 4.306%.
However, gains are capped ahead of the BoJ policy meeting tomorrow after a weekend Nikkei news report said that the BoJ would hike rates at that meeting.
AUD/USD traded in a 0.6554-0.6575 range. Traders shrugged off weak Chinese property investment data and inched higher into the NY open. The RBA is expected to leave rates unchanged at tomorrow's meeting.
Canadian Industrial Product Price and Raw Material Pricing data is released this morning.
